Bond ETF Investors Are Steering Toward High-Yield

While the riskier segments of the markets have come under fire, high-yield bond ETFs continue to attract investors.

For example, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) was the fourth most popular ETF play of the quarter to date, attracting $2.6 billion in net inflows, according to XTF data. HYG added $653.7 million in inflows for the past month.

The shift in sentiment is a stark contrast to earlier this year when investors dumped high-yield debt. Despite its recent inflows, HYG still experienced a net outflow of $703.2 million year-to-date. Additionally, the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) remains one of the most hated ETF plays of the year as investors pulled $2.8 billion from the fund.

Junk bonds have been outperforming in the fixed-income class and remain one of the lone areas in the bond market still pushing out a positive return. HYG rose 1.7% and JNK gained 1.0% year-to-date while the benchmark Bloomberg Barclays US Aggregate Bond index fell 1.1%.

The Federal Reserve’s ongoing rate normalization plans have kept pressure on fixed-income market sentiment. Many anticipate there will be at least one to two more interest rate hikes out of the Fed this year due to strong economic data, like better-than-expected GDP growth and high employment, CNBC reports.